Beruflich Dokumente
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One
An
Introduction
to
Accounting
McGraw-Hill Education
LO
LO 11
Explain the role of
accounting in
society.
1-2
Should I
invest
money in
Apple or
Google?
1-3
Market-Based Allocations
A market is a
group of
people or
entities
organized to
exchange
items of value.
1-4
0
0
7
3
3
5
9
9
0
4
1-5
Market-Based Allocations
Common terms for the added value
created in the transformation
process:
Profit
Income
Earnings
1-6
Financial Resources
Conversion agents need financial
resources (money) to establish and
operate their businesses.
Investors
Creditors
1-7
Physical Resources
In their most primitive
form, physical
resources are called
natural resources.
Owners of physical
resources seek to sell
those resources to
profitable businesses
which are able to pay
higher prices and
make repeat
purchases.
1-8
Labor Resources
Labor resources
include both
intellectual and
physical labor.
Workers seek
relationships with
businesses that have
high earnings
potential because
these businesses are
better able to pay
high wages.
1-9
Focused on the
needs of external
users
Manageria
l
Accountin
g
Focused on the
needs of internal
users
1-10
Non-business Resource
Allocation
Not all entities allocate resources based on
profitability. Organizations that are not
motivated by profit are called not-for-profit
entities.
Government,
foundations,
religious groups, the
Peace Corps, and
various benevolent
organizations
allocate resources
based on
humanitarian
concerns.
1-11
1-12
Careers in Accounting
Public
Accounting
Certified Public
Accountant
Audit services
Tax services
Consulting services
Private
Accounting
Certified Management
Accountant
Certified Internal Auditor
1-13
Measurement Rules
The Financial Accounting Standards
Board establishes measurement and
reporting rules that businesses use
to facilitate communication.
Generally
Accepted
Accounting
Principles
1-14
Reporting Entities
Financial accounting
reports disclose the
financial activities of
particular
individuals or
organizations
described as
reporting entities.
Each entity is
treated as a
separate reporting
unit.
Busines
s
Owner
Bank
1-15
LO 22
LO
Construct an
accounting
equation and
show how
business events
affect the
equation.
1-16
Elements of Financial
Statements
1. Assets
2. Liabilities
3. Equity
4. Contributed Capital
5. Revenue
6. Expenses
7. Distributions
8. Net Income
9. Gains
10. Losses
The
elements
represent
broad
categories.
We will discuss
elements 1-8 in this
chapter. We will
save elements 9
and 10 for a later
chapter.
1-17
Elements of Financial
Statements
1. AssetsCash, Equipment, Buildings, Land
2. Liabilities
3. Equity
4. Contributed Capital
5. Revenue
6. Expenses
7. Distributions
8. Net Income
9. Gains
Subclassification
s of the
elements are
frequently called
accounts.
Accounts are
reported in the
financial
statements.
10. Losses
1-18
Accounting Equation
Assets = Claims
Claims on the assets are from two
sources:
1. Creditors (liabilities)
2. Investors or owners (equity)
Accounting Equation
Assets = Liabilities + Equity
Assets =
Liab.
$ 500 = $
Assets
$ 500
Equity
200 + $
Liab.
$
300
Equity
200 = $
300
1-20
Accounting Equation
Assets = Liabilities + Equity
Transaction
1. Source
2. Exchang
e
3. Use
1-22
1-23
DoubleEntry
Bookkeepin
g
Asset
Source
Transaction
Recorded in
Two Places
1-24
Asset
Source
Transaction
2. RCS increases
liabilities (notes
payable).
Assets
Beginning Balance
Acquired Cash by Issuing Note
Ending Balance
Cash
120,000
400,000
520,000
+
+
+
+
Land
n/a
n/a
n/a
Liab.
Stockholders' Equity
=
=
=
=
N. Pay.
n/a
400,000
400,000
+
+
+
+
C. Stk.
120,000
n/a
120,000
+
+
+
+
Ret. Ear.
n/a
n/a
n/a
1-25
Asset
Exchange
Transaction
2. RCS increases
assets (land).
Assets
Beginning Balance
Paid Cash to Buy Land
Ending Balance
Cash
520,000
(500,000)
20,000
+
+
+
+
=
Land
=
n/a
=
500,000 =
500,000 =
Liab.
N. Pay. +
400,000 +
n/a
+
400,000 +
Stockholders' Equity
C. Stk.
120,000
n/a
120,000
+
+
+
+
Ret. Ear.
n/a
n/a
n/a
1-26
Asset
Source
Transaction
2. RCS increases
stockholders
equity (retained
earnings).
Assets
Beginning Balance
Acquired Cash by Earning Revenue
Ending Balance
Cash
20,000
85,000
105,000
+
+
+
+
Land
500,000
n/a
500,000
Liab.
Stockholders' Equity
=
=
=
=
N. Pay.
400,000
n/a
400,000
+
+
+
+
C. Stk.
120,000
n/a
120,000
+
+
+
+
Ret. Ear.
n/a
85,000
85,000
revenues
1-27
Asset Use
Transaction
2. RCS decreases
stockholders
equity (retained
earnings).
Assets
Beginning Balance
Used Cash to Pay Expenses
Ending Balance
Cash
105,000
(50,000)
55,000
+
+
+
+
Land
500,000
n/a
500,000
Liab.
Stockholders' Equity
=
=
=
=
N. Pay.
400,000
n/a
400,000
+
+
+
+
C. Stk.
120,000
n/a
120,000
+
+
+
+
expense
s
Ret. Ear.
85,000
(50,000)
35,000
1-28
Asset Use
Transaction
2. RCS decreases
stockholders
equity (retained
earnings).
Assets
Beginning Balance
Used Cash to Pay Dividends
Ending Balance
Cash
55,000
(4,000)
51,000
+
+
+
+
Land
500,000
n/a
500,000
Liab.
Stockholders' Equity
=
=
=
=
N. Pay.
400,000
n/a
400,000
+
+
+
+
C. Stk.
120,000
n/a
120,000
+
+
+
+
Ret. Ear.
35,000
(4,000)
31,000
dividend
1-29
Reliability
Concept
Information is
reliable if it can be
independently
verified.
Appraised values are
opinions and will
vary from appraiser
to appraiser.
1-30
LO 3
LO 5
Interpret
information shown
in an accounting
equation.
1-31
Liabilities,
common stock
and retained
earnings are not
cash.
1-32
Creative
Associates sells its
land for $1,900.
Although the
company has
$2,300 in cash, it
may only pay $600
in dividends.
1-33
LO 4
LO 7
Classify business
events as asset
source, use, or
exchange
transactions.
1-34
Increase
one asset,
decrease
another
asset
Decrease
total assets,
decrease
total claims
1-35
Summary of Transactions
Assets
Event
1
2
3
4
5
6
7
Cash
+
Land
$
$
120,000
400,000
(500,000)
500,000
85,000
(50,000)
(4,000)
n/a
n/a
$ 51,000 + $ 500,000
Liab.
Notes
=
Payable
$
-
Stockholders' Equity
Common
+
Stock
$
120,000
Retained
+ Earnings
$
-
Other
Account
Titles
400,000
= $
n/a
400,000
+ $
n/a
120,000
85,000 Revenue
(50,000) Expense
(4,000) Dividend
n/a
+ $ 31,000
LO 5
LO 8
Prepare an income
statement, a
statement of
changes in
stockholders
equity, and a
balance sheet.
1-37
Revenues exceeded
Income is
expenses.
measured for a
span of time
Net Loss
called the
Revenues
are matched
to expenses. results when expenses Accounti
ng Period
exceed revenues.
1-38
1-39
Assets
are
displayed
in order
of
liquidity.
equa
l
1-40
LO 6
LO 8
Prepare a
statement of cash
flows.
1-41
Investing
Financing
1-42
LO 7
LO 8
Explain the
closing process.
1-43
Establishes zero
balances in all
revenue, expense, and
dividend accounts.
1-44
Temporary
Temporaryaccounts
accounts
track
trackfinancial
financial
results
resultsfor
foraalimited
limited
period
periodof
of time.
time.
Permanent
Accounts
Equity
Liabilities
Expenses
Temporary
Accounts
Assets
Dividends
Revenues
Permanent
Permanent accounts
accounts
track
trackfinancial
financial
results
resultsfrom
fromyear
year to
to
year.
year.
1-45
LO 8
LO 9
Record business
events using a
horizontal
financial
statements
model.
1-46
1-47
Merchandisin
g Businesses
Manufacturin
g Businesses
1-48
Annual Reports
(1) Financial Statements
(2) Notes
(3) Auditors Report Chapter 6
(4) Managements Discussion
and Analysis (MD&A)
1-49
1-50
1-51